The test index of production of services shows sustained dynamics in August

New Delhi: Indian services activity remained broad-based in August, with 17 out of 19 sub-sectors recording growth and 13 posting double-digit gains, suggesting sustained momentum in formal sector services despite mixed signals from manufacturing and foreign trade, the centre’s fifth test Index of Services Production (ISP) showed on Thursday.

The 19-sector index covering about 60% of the services sector provides a new monthly measure of activity in a sector that accounts for more than half of India’s economy.

The overall ISP will be released later after studying the stability and resilience of sub-sector ISPs and improving overall service coverage, the Ministry of Statistics and Program Implementation said in a statement.

The main sub-sectors that showed continued strong growth are accommodation and catering (11.9%), retail (19.9%), repair services (17.6%), administrative and support services (13.1%), banking (14.9%), professional, scientific and technical services including research and development (14.2%), IT and computer services (13.8%) and real estate (17.6%).

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While rising energy prices due to the war in West Asia kept growth in air transport services in negative territory at -9.6%, growth in arts, entertainment and leisure services also remained in negative territory at -4.7%.

Growth in other transport services – rail, road and waterways – also remained in single digits at 3.7%, 9.4% and 9.5% respectively.

Postal and courier services and information and radio services, which were in the negative zone in previous months, showed a continuous growth of 13.2%, respectively. 7.2%. Repair services, where growth slowed in July, also saw a smart recovery, posting double-digit growth in August.

While retail saw high double-digit growth in August, wholesale growth remained relatively lower at 102%. Telecommunication activities, storage and support activities in transport grew by 11.8%, respectively. 11.2%.

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“ISP is growing at 14.0% year-on-year, confirming strong growth momentum,” said DK Srivastava, Senior Policy Advisor, EY India. “ISP has shown a double-digit growth rate since June 2026, with an average growth of 13.6% in the three months to August. Given the weight of the services sector in total GDP, these trends suggest the potential for healthy GDP growth in the second quarter of 2026-27. This is also borne out by the growth of IIP in the second quarter, which averaged 7.3%.

Service sector data

The ISP was designed as an equivalent of the Index of Industrial Production (IIP) in the services sector and provides the government, the Reserve Bank of India (RBI) and financial markets with a high-frequency indicator to gauge economic activity instead of relying mostly on quarterly estimates of Gross Domestic Product (GDP) and indirect proxies such as Goods and Services Tax (GST) credit collections, Purchasing Managers’ Indexes and Banking Indices (P.MI).

A series of trials should initially be issued to validate the methodology and get feedback from stakeholders before the index becomes a part of India’s regular statistical reports.

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The new indicator comes at a time when services have emerged as the country’s main driver of growth, accounting for more than 53% of gross value added (GVA) and contributing significantly to employment, exports and investment.

Unlike the IIP, which measures physical output in manufacturing, mining and electricity, the ISP captures changes in the real output of services. Since services are generally produced and consumed simultaneously and do not accumulate inventory, the index primarily uses turnover as an inflation-adjusted measure of output.

Economists believe that the ISP could become one of India’s most closely watched macroeconomic indicators, complementing the IIP in assessing overall economic dynamics.

“The August ISP numbers point to resilient domestic demand for activity-supporting services, and as a newly introduced experimental series, the ISP is a welcome addition to India’s statistical framework,” said Pranjal Ghate, economist at Brickwork Ratings.